Government intervention doesn’t always result in a better outcome when it comes to business regulation, but it was important to introduce a regulatory regime to the financial services industry, according to Parliamentary Secretary to the Treasurer Chris Pearce.

Speaking at a business dinner last week, he said while it would be inappropriate “to introduce regulation where the costs outweigh the benefits”, the financial services industry is a different matter.

“A radical overhaul [of the financial services industry] was needed to safeguard the growth of individual wealth resulting from the Government’s successful economic policies,” he said.

Mr Pearce said it is difficult for the Government to determine whether it should intervene in an industry. “The fact that market inefficiency exists does not – in my view – mean that regulatory intervention is necessarily the right answer.

“Regulation imposes costs on the economy,” he said. “Clearly it would be inappropriate to introduce regulation where the costs outweigh the benefits.”

The industry’s concerns about costs associated with financial services reform (FSR) was one of the factors that spurred Mr Pearce to develop refinements to the legislation.

“FSR is sound, principles-based legislation that delivered what it promised. The problem areas lay with the way it was implemented, and over-elaboration through subordinate legislation.”